Bonds regain losses as markets digest jobs report

U.S. equity futures experienced a quick burst of buying after government data showed employers added more jobs than forecast and the unemployment rate unexpectedly declined. Non-farm payrolls came out at +146,000, with the median Bloomberg estimate calling for a number of 85,000. The closely watched unemployment rate fell to 7.7%, the lowest since December 2008. Watch for Jack Welch tweets. The Michigan consumer sentiment number decreased more than forecast, coming out at 74.5, down from 82.7 a month earlier.

We stick to our key pivot level for the DEC12 E-mini S&P 500 futures of 1420. We do anticipate a potentially strong rally if there is some deal regarding the fiscal cliff, however for now it is indeed a waiting game. As of this writing the S&P is weakening off of the high of 1422, now trading at 1413. This is evidence in our eyes that there really is a likelihood of highly subdued trading until the market knows more about 2013′s tax and budget situation.

In other commodities news, we would like to first focus on sugar. Sugar futures are still hovering very close to the very important level of 19 cents. Technically, we view potential for the sugar market to break down beneath this key level. Brazil’s top sugar industry group Unica said last week that sugar output in Brazil’s Center South-region jumped 37% in the first two weeks of November compared to the same period a year earlier. This information may very well be priced into the market, but still does not change our short term bearish outlook on sugar.

We’d like to focus today on the U.S. 30-year bond futures contract (DEC12). After the employment number, the bonds initially sold off almost 1 point, but now are clawing back some of their losses. 151 is our key resistance level, and we have our key multi-month pivot at right above 148’16. If the non-farm payrolls reports start the first quarter of 2013 with a bang, we could see the bonds breach this key pivot level to the downside. Our next support level comes in at around 146’24.  The next major support level is 145. It seems like everyone is always looking for the big bear market for treasury bonds, so our outlook is tempered by the Fed’s involvement in this market. However, sometimes the markets move sharply when the least amount of people expect it.

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About the Author
Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.

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